INTERVIEW: Olumide Adeosun
In what ways can the downstream sector benefit from the Petroleum Industry Act (PIA)?
OLUMIDE ADEOSUN: Political will and private sector engagement are necessary to benefit from liberalisation under the PIA. Separating the Nigerian National Petroleum Corporation’s roles as regulator, operator, competitor and price determiner should stabilise fuel prices and availability, especially in terms of petrol.
Full deregulation offers a pathway to increased investment. Moreover, as the big retailers are also the providers expanding service station offerings – including electric mobility – we expect to see further developments in the clean energy transition.
Where do you foresee growth in refining capacity?
ADEOSUN: Increased capacity will be driven by large refineries across the West African coast. While there has been some development, Nigeria has fewer than 10 operational modular refineries. The goal is to facilitate investment that can revitalise and upgrade the national refineries in order to meet market realities.
Demand for fuel is increasing in line with Nigeria’s developmental and demographic needs, and we must enable investment to capitalise on the PIA’s policy framework. Nigeria’s consumption of 60-70% of the fuel earmarked for West Africa underscores the scale of opportunity that investment can help to unlock.
This will also help to address the jet fuel price crisis. While modular refineries are able to produce jet fuel, meeting global quality standards remains a challenge. Regulatory intervention may be necessary to acquire international certification and, by extension, ensure the availability of jet fuel in the local market.
What are the requisite steps to accelerate the transition towards natural gas projects?
ADEOSUN: The rhetoric around leveraging Nigeria’s gas reserves must be matched with implementation. We need to disincentivise gas flaring and stop all gas derivatives exports. To deepen the penetration of natural gas for industrial and domestic use, Nigeria’s gas must be reserved for domestic use.
The local supply of liquefied petroleum gas has not kept pace with demand, increasing our exposure to global energy prices. As such, there is a need to incentivise gas penetration at both the policy and investment levels. Realising the “decade of gas” requires an investment climate free from regulatory restraint.
To what extent is the local ecosystem able to meet the funding needs of energy projects?
ADEOSUN: Nigeria is no longer considered a prime investment destination for integrated oil companies, which is underscored by increased divestment. Additionally, there is less foreign appetite for conventional funding for hydrocarbons. Nigerian banks are unable to secure financing from international banks with strong investment policies related to fossil fuel projects. Nevertheless, funding does exist for the right assets.
Ultimately, there is greater funding appetite for cleaner fuels, which has manifested in increased investment in natural gas projects. Nigeria must redefine its value proposition as an investment destination to attract the requisite capital inflows.
How do you evaluate the importance of renewable energy in meeting electrification goals?
ADEOSUN: We must embrace the transition, especially as Nigeria is projected to reach peak oil capacity in 15 years. Deregulation of the downstream sector will accelerate the end of fossil fuel dependence in Nigeria given the attending costs. There is increasing demand for cheaper alternatives, such as solar, which will further intensify as technological improvements reduce the cost of generating power from renewables. While the transition will occur organically, the future of electrification in Nigeria will be powered by a decentralised network of mini off-grid power generators.
Read More from OBG
